“We have it in our power to begin the world over again.” The words were penned by Thomas Paine some 225 years ago, but they could just as well have been spoken by President George W. Bush in 2003. And in a sense, they were. “Our founders dedicated this country to the cause of human dignity, the rights of every person, and the possibilities of every life,” Bush explained in his 2003 State of the Union. “This conviction leads us into the world to help the afflicted, and defend the peace, and confound the designs of evil men.”

Since September 11, 2001, the White House has made no secret about its willingness—and America’s capacity—to confound the designs of evil men by tearing down the vast infrastructure of terrorism, and in the process to transform the world through the destructive force of arms. Less publicized has been the Bush administration’s readiness to help the afflicted by building an infrastructure of democracy in the forgotten corners of the world, and to begin the world over again through the creative force of American ideas and wealth.

Bush is not relying solely on the traditional instruments of foreign aid to spread American ideas and wealth in a new century. In fact, in his Millennium Challenge Corporation, he is unveiling a brand-new tool of US power that could transform both foreign aid and the developing world.

The Hoover Plan

Contrary to popular opinion, foreign aid is not a new phenomenon. Indeed, it was a tool of US policymakers long before Harry Truman and George Marshall rebuilt Europe.

As Robert Bremner details in his book American Philanthropy, concerted efforts to raise and distribute foreign aid on the part of Americans date back at least to 1820, when volunteer committees collected money to support Greek independence and care for Greek orphans. In 1832, the United States sent a relief ship full of supplies to the Cape Verde Islands. When Ireland was ravaged by famine a little over a decade later, America sent much more. According to Bremner, “To carry the contributions of Massachusetts alone required two sloops of war, four merchant ships, and two steamers.”[1] Although these efforts were spearheaded by non-government organizations, given the use of American vessels, the government obviously played more than a passive role. This role would significantly expand as the 19th century gave way to the 20th century.

It was the First World War that triggered the first great transformation of American foreign aid. Early in the war, with Belgium blockaded and its nearly 8 million people on the brink of starvation, the United States helped form the Commission for Relief in Belgium (CRB). Headed by Herbert Hoover, the CRB pooled philanthropic and government contributions from the United States, Britain, Belgium and France. Most of the money came from government sources, however. According to Bremner, individuals and charities accounted for just $52 million of the $1 billion the CRB spent during the war.[2]

The Treaty of Versailles may have ended the war, but it did little to erase the need for foreign aid. If anything, it exposed the need for continued aid. Washington thus created the American Relief Administration (ARA), and Hoover was a natural to lead it. In certain ways, as historian Paul Johnson observes, this postwar commission was a precursor to the Marshall Plan, especially in how it promoted US interests. Johnson notes in his weighty history of the 20th century, Modern Times, that Hoover used the commission to undermine a communist government in Hungary, cripple the monarchy’s return in Austria and prop up “regimes the Anglo-Saxon powers favored.”[3]

However, the post-World War I aid picture was not as black-and-white as the post-World War II picture. As a matter of fact, at Hoover’s direction, the ARA sent food aid to the Soviet Union in 1921. Responding to criticism that he was helping the Bolsheviks—which, it pays to recall, a US expeditionary force tried to overthrow in a failed postwar operation—Hoover argued, “Twenty million people are starving. Whatever their politics, they shall be fed.”[4]

With the rise of isolationism between the wars, America’s willingness to send aid overseas ebbed. However, by 1939, Washington was again using foreign aid as a tool of foreign policy. In addition to the millions appropriated for military aid to Great Britain, Congress shunted $50 million to the Red Cross between 1939 and 1941 to help war refugees. Six months after America’s entry into the war, President Franklin Roosevelt created the War Relief Control Board, which coordinated most non-military foreign aid for the balance of the war.

In 1943, with the creation of the United Nations Relief and Rehabilitation Administration, US foreign aid experienced its second great transformation. As Bremner notes, the UNRRA was comprised of 50 governments. Together, they spent $4 billion on food, clothing and medicine to ease the suffering of refugees and liberated peoples alike. At $2.6 billion, America’s contribution accounted for close to 75 percent of the UNRRA’s generosity.[5] It would be just a fraction of what was to come.

Priming the Pump

Truman and Marshall may not have invented foreign aid, but they certainly revolutionized it—and they reshaped the world in the process.

Truman recognized early on that foreign aid was not just a tool, but a weapon in the Cold War with Moscow. In Truman’s view, “The seeds of totalitarian regimes are nurtured by misery and want. They spread and grow in the evil soil of poverty and strife. They reach their full growth when the hope of a people for a better life has died.”[6] To prevent those seeds from taking root, Truman sent aid first into Turkey and Greece, and later into all of Western Europe.

Humanitarian aid proved just as important as military aid. The former prevented communist ideas from taking root; the latter prevented communist tanks taking territory. In just over four years, the Marshall Plan—named after George Marshall, Truman’s secretary of state—poured $13 billion into Western Europe’s industry, infrastructure and economy. As such, it was decidedly different than the CRB or ARA. As their names suggest, those World War I-era aid programs focused on relief. Their aim was to relieve immediate, even temporary, conditions—hence, food and blankets for an encircled Belgium; rations for starving children in Russia.

Because of the near-total devastation wrought by the Second World War’s march through Europe, the Marshall Plan’s scope was much wider, its success much more critical to US interests than previous efforts. It is important to remember that Secretary of State Marshall called on European governments first to develop and submit long-term plans for rebuilding their countries. Only those plans that were economically sound and open to trade and investment would be supported by Washington. The program would be administered not by a relief or humanitarian-aid agency, but by the Economic Cooperation Administration.

Just as it was different than its predecessors, the Marshall Plan was decidedly different than most of the foreign-aid programs that followed, as Derek Leebaert explains in his history of the Cold War, The Fifty-Year Wound. Marshall aid didn’t rebuild Western Europe, at least not in a technical sense. In Leebaert’s view, “it simply primed the pump.”[7] He notes that postwar Europe “had in place virtually all the skills and resources to repair itself.” It was an advanced and educated, if shattered, society. Beneath the ruins of war lay the solid foundations of private enterprise, enlightened self-interest, productivity and sound economic policies. Many of the war-weary countries even had recent histories of representative government and constitutional governance. The Marshall Plan removed the wreckage and built on those solid foundations. Not surprisingly, most Marshall aid went to the United Kingdom, France, Italy and what would become West Germany. When the program ended, the industrial capacity of Western Europe was 35 percent higher than it had been prior to the war.[8]

It made good sense for America: If, as Johnson concludes, “Economic disorder precedes the military disorder of war,” then by rehabilitating Western Europe the Marshall Plan prevented both forms of disorder. In addition, it firmly cemented Western Europe in Washington’s corner during the global struggle with communism, while creating a market where US dollars could be spent and invested. As Johnson points out, “the American export surplus, by the second quarter of 1947, was running at an annual rate of $12.5 billion.” Since it was almost exclusively spent on US goods and equipment, “Marshall aid recycled part of that surplus.”[9]

Although it was overshadowed by the Marshall Plan, Truman also launched a purely humanitarian aid program known as “Point Four” in 1950. The program offered technical and scientific aid to some of the poorest countries in Africa and Asia. By fighting the symptoms of poverty rather than attacking the causes, Point Four was a precursor to the aid programs that dominated the balance of the century.

The Marshall Plan was replaced by a more comprehensive foreign-aid program in 1951, which bundled together military and non-military aid and created the Mutual Security Agency. However, within a decade, President John Kennedy would conclude that postwar aid programs were no longer adequate. Echoing Truman and expanding on his scope, Kennedy argued that developing countries well beyond Europe needed American assistance. Their economic collapse, he warned, “would be disastrous to our national security, harmful to our comparative prosperity and offensive to our conscience.” Thus was born the US Agency for International Development, embodying a fifth generation of US foreign assistance. In its own words, USAID was “freed from political and military functions that plagued its predecessor organizations.” Its broad mandate would include administering long-range economic-development programs, providing technical assistance to governments, overseeing loan programs, and distributing agriculture surpluses.[10]

Even so, in another sense, it was a step backwards, since it separated military and non-military aid—which, after all, the 1951 reforms had brought together. Moreover, USAID ignored some of the lessons of the Marshall Plan. Despite the best intentions of its architects, USAID often dumped money onto shaky foundations and into questionable hands. Leebaert notes that USAID and similar international-aid organizations virtually “force-fed” American dollars into a bottomless pit of corrupt, unstable and backward regimes. We cannot gauge how many of them might have turned to Moscow were it not for US assistance (of course, some of them did anyway). Nor can we can calculate how a more judicious use of US aid dollars might have affected the Cold War. However, we can quantify how much this feeding frenzy cost American taxpayers: some $2 trillion.[11]

Today, USAID has a presence in almost 100 countries.[12] US agencies spend some $10 billion in official development assistance annually and another $13 billion in other forms of aid, such as peacekeeping, cultural exchanges, military training and support for banks.[13] Not all of it is wasted, of course. There is no doubt that post-Marshall assistance has rescued millions from famine and disease. Indeed, at $2.5 billion, the US government donates more food aid per year than any other country on earth.

However, America’s post-Marshall aid has achieved precious little in the form of lasting, substantive change—the kind of systemic reforms that over time should make foreign assistance less necessary. Take Africa, for example, a major recipient of humanitarian and development assistance over the last three decades. Leebaert notes that by the end of the Cold War the continent’s sub-Saharan peoples—numbering 500 million and comprising 47 countries, many of them rich in resources—combined to generate the same gross domestic product as tiny Belgium.[14]

As Rep. Jim Kolbe, chairman of a House foreign operations subcommittee, detailed in a recent study, Washington has distributed $144 billion in aid to 97 of the world’s poorest countries since 1980. In the intervening decades, the median per capita GDP of those countries has shrunk from $1,076 to $994.[15] USAID itself concedes that there is an “emerging consensus…that aid reduces poverty only when economic polices support sustained economic growth and when benefits of growth are widely shared”[16]—which is something Secretary Marshall and other designers of the postwar program that saved Europe understood over a half-century ago.

Foreign Aid Version 6.0

Tired of simply throwing money at symptoms, the Bush White House wants America's foreign-aid program to target the root causes of poverty in corners of the world that are perpetually developing, but seemingly never fully developed. In Bush’s view, “We must include every African, every Asian, every Latin American, every Muslim, in an expanding circle of development.”[17] In these sweeping pronouncements, one can hear an echo of Paine’s revolutionary words.

Of course, traditional foreign aid is not the only way to realize Bush’s breathtaking goal. Trade and investment also play an important role in development: The American people purchase some $450 billion every year from developing countries; and according to USAID, “the United States is the greatest source of private capital to developing countries, averaging $36 billion” per year.[18] Moreover, as Carol Adelman, a senior fellow at Hudson Institute and former USAID official, observes, “The true measure of American generosity is the total amount of aid given abroad, including private donations.” When US government aid is combined with contributions from foundations, corporations, charities and individuals, America’s assistance to developing countries approaches $57 billion annually.[19]

In the same way, the Bush administration’s Millennium Challenge Corporation takes a broader view of foreign aid than other efforts. Indeed, it represents the next generation of US foreign aid. Although Congress is still fine-tuning legislation authorizing the MCC, the outlines of the program have already been drawn. Once fully funded in 2006, the MCC will administer a $5-billion Millennium Challenge Account. This is in addition to existing foreign-aid spending, which means the Millennium program will amount to a 50 percent increase in official development assistance, among the largest in US history. It will task fewer than 100 employees to review and distribute grant requests from some of the world’s poorest countries—initially, nations with annual per-capita incomes below $1,435. A larger pool of developing nations with per-capita incomes of up to $2,975 will be invited to participate in follow-on years. More than 110 countries will be eligible by 2006.

The MCC differs from existing aid programs in several ways: First, it is results-oriented. MCC aid will be based solely on how an applicant scores on a rigorous test of social-political progress. Portions of assistance have been based on certain performance criteria in the past; however, as a recent Congressional Research Service report observes, “what is significantly different about the Millennium Challenge Account is that the entire $5-billion pool…will be tied to performance and results.”[20] Applicant nations will be ranked according to 16 separate indicators, grouped under three broad headings: Ruling Justly, Investing in People, and Economic Freedom. These performance indicators will rate everything from an applicant’s respect for civil liberties and political rights, to its fiscal policy and openness to trade, to its internal markets and regulatory climate, to its immunization statistics and investment in education (see sidebar for a complete listing). Above all, the MCC will scour applicant countries for any signs of corruption.

In a word, countries that hope to tap into this new source of aid will have to make room for civil society—that amorphous zone of space where liberty flourishes and where places of worship, businesses, charities, associations, unions and political parties buffer the individual from the state. By rewarding those nations that are striving to transition from statism and dependency to economic and political liberalization, Bush believes Millennium Challenge Grants will build “the infrastructure of democracy.” As Don Eberly, a USAID official specializing in international civil society, puts it, this next generation of foreign aid will “promote international economic development by developing the fruits of civil society in other countries.”[21]

Not only is the MCC results-oriented, it is also entrepreneurial, fair and competitive. In a reprise of the Marshall Plan, the onus is on each eligible country to apply for Millennium grants. This is not a hand-out program: Applicant countries must develop and submit a proposal for aid that will lock in or even strengthen existing reforms.

The MCC also injects some fairness and common sense into America’s foreign-aid program. The developing world is by no means a monolith. Just as there are different kinds of poverty and impoverished people in America, there are different kinds of impoverished countries on earth. Yet the way these various countries are treated may not always be fair. For example, according to the Congressional Research Service, foreign aid accounts for 10.8 percent of the gross national income of countries with per-capita incomes below $1,435. However, foreign aid accounts for a paltry 1.4 percent of the gross national income of countries with per-capita incomes between $1,436 and $2,950.[22]

Although it is an imperfect analogy, this is something like the disparity between how America treated the working poor and the able-bodied who refused to work prior to welfare reform. The first group worked hard, played by the rules, tried to be productive, barely eked out a living, and received little if any assistance from the government. Many of those in the other group didn’t work, played the system, often lived more comfortably than their working counterparts and were rewarded for being unproductive. It didn’t make sense in America, and it doesn’t make sense in Africa or Asia to help one group and ignore the other. As Eberly observes, “For too long, our policies were yielding the same failed dependency-producing results [overseas] that our policies at home had been producing.”[23] Through the MCC, Washington can reward those countries that are truly developing, while continuing to assist those that lack the capacity or resources to develop on their own.

Finally, Millennium grants will be competitive. In fact, there are actually two layers of competition built in to the program. First, applicant countries will be competing with each other for this bonus pool of grants. They won’t win the competition simply because they are poorer than a neighbor, because they have hired a better lobbyist, or because a Congressman was moved by images broadcast on CNN. The only way a government can earn an MCC grant is to put freedom ahead of itself and lay the foundations of civil society. In addition, the White House is open to allowing non-government organizations within an eligible country to apply for MCC aid, which opens the door to the possibility that elements of the state and civil society from the same country could compete against each other.[24]

Bypassing Bureaucracy

Without question, the MCC represents a change; however, it is by no means a radical or risky change. Since Millennium grants will be offered in addition to existing US foreign aid, people from the developing world will not be negatively impacted if the experiment fails. Of course, their countries and lives could be dramatically improved if the experiment succeeds. Indeed, there is a synergy that could develop here: By reflecting a nation’s capacity to build civil society, the program would not only reveal the recipient’s progress (which is to say, development)—it would also illustrate that the recipient is a solid and safe investment for non-government aid, which itself would help promote the process of development.

Think of USAID and the MCC like two parts of the same house. USAID provides the bricks and mortar of the house, while MCC grants will help strengthen (or rebuild) the foundation of the house. Both are important: Without a foundation, the bricks and mortar will crumble. And without bricks and mortar, the foundation serves no purpose. After focusing most of its energies and aid over the last 40 years on “bricks and mortar” in the Third World, it makes sense for America to invest in expanding and shoring up the foundations of civil society overseas. This is a task to which America is well-suited. As Leebaert argues, the United States was most effective during the Cold War not in playing the role of global banker, but in “showing and sharing its approach to private enterprise by opening its markets to exports and nurturing small businesses.”[25]

Moreover, although the United States did not create civil society, it has arguably done more to nurture it than any other nation on earth. That’s largely because the United States has used public policy to promote civil society, rather than weaken it. For example, US tax and regulatory policies encourage charitable giving and often defer to civil society. Indeed, there are some 46,000 foundations in America; 1.6 million associations, nonprofit organizations and religious groups, and uncounted businesses—some so large that they span several continents, others so small that they are contained in a garage or a spare bedroom.[26] As Alexis de Tocqueville marveled, thanks to America’s vibrant civil society, “The hand that directs the social machine is invisible.”[27]

While there are many of us who worry about the creeping expansion of the state, America remains a remarkable example of what civil society can do when given room to grow. If the habits and infrastructure of civil society are exportable, then it is the United States that will lead the world in sharing these precious commodities with the countries that lack them—and it is the MCC that will deliver them.

However, this is not to say, as some MCC critics have argued, that Millennium grantees will become clones of America. “The unspoken message of the fund,” sneers the New York Times, “is that countries seeking the cash must show that they are reorganizing their societies according to Washington’s standards.”[28] This line of criticism, while predictable, is regrettable. No country is being forced to imitate America. However, as Bush has argued—and billions of people in the developed world can attest—there is only one “sustainable model for national success: freedom, democracy and free enterprise.”[29] Taking their cues from Western elites, political leaders in the developing world—most of whom govern without the consent of their subjects—view the United States as a villain rather than a model.

Whether or not they like the messenger, these self-styled leaders should heed Bush’s commonsense message: Fascism doesn’t work, nor does communism, nor does state capitalism, nor does kleptocracy, nor does anarchy, nor does Wahhabi fundamentalism. The United States is simply offering an alternative to those failures. “We must make people partners in their own development,” Eberly argues. “We need to bypass bureaucracies and international technocrats and work with citizens and local community-building groups,” he adds.[30] This is not neo-imperialism; in fact, it is arguably the same liberating, independence-minded message the United States has promoted since World War II.

More and Less

While on the subject of war, the MCC certainly has implications for the global campaign against terrorism. In fact, many of the countries that will be eligible for Millennium Challenge Grants are also key fronts in the war on terror.

For example, al Qaeda and its kindred movements have targeted Americans in Yemen, Kenya, Somalia, Indonesia and Tanzania—all of which will meet the MCC eligibility requirements in Year One. In various ways, US forces are waging the war on terror in Kazakhstan, the Philippines, Georgia, Afghanistan and Djibouti—all of which will meet the MCC eligibility requirements in Year One or Year Two. Islamic terrorists are roaming freely in Iran and Arafat’s Palestine—both of which will meet MCC eligibility requirements by Year Three. (Of course, it is worth noting that even if they meet the financial requirements, countries such as Iran are barred from participating in the MCC program because of ties to terrorism.)[31]

Can the MCC make a difference in these lawless, broken lands? We won’t know for a while, but one thing is beyond debate: MCC funds cannot make the situation any worse. In the late 1980s and early 1990s, America shoveled millions in humanitarian aid into Afghanistan. What if the authorities in the admittedly chaotic environs of Kabul, Kunduz or Kandahar had been given an explicit incentive to protect civil liberties or educate both boys and girls or promote private enterprise? By setting new standards for aid, Washington is racing to prevent yet another country from sliding into a Taliban abyss.

In 2001 and 2002, Washington poured $143 million into proto-Palestine. What if some or all of that aid had been dependent on Arafat making room for civil society? And what if his gang knew they had an opportunity to apply for five or ten times as much, if only he would loosen his stranglehold on power? Perhaps these questions will be answered in the not-too-distant future.

Contrary to what some have argued since September 11, 2001, these and other unfortunate peoples are just as capable of building civil society and practicing democracy as their neighbors in the developed world. They do not succumb to Islamic radicalism because they are Saudi or Sudanese, Filipino or Palestinian. As Bush observes, “It is presumptuous and insulting to suggest that a whole region of the world—or the one-fifth of humanity that is Muslim—is somehow untouched by the most basic aspirations of life.”[32]

Nor do they succumb simply because they are poor. Money alone is neither the cause of, nor the cure for, this sickness—as evidenced by Saudi Arabia, where there is great wealth but precious little room for civil society. There is often a nexus between the breadth and depth of civil society in a nation and the overall health of that nation. According to Bush, those governments that are too weak or too detached to fight the sickness of despair “become havens for terror.”[33] By focusing on building new foundations, Bush is betting that the MCC will help stabilize teetering countries and transform those havens of terror into something else—hopefully something better.

The MCC is both more and less than a modern-day Marshall Plan. In sheer size and cost, this 21st-century strategy for development is far smaller than the Marshall Plan that revitalized Europe. However, in its aims and objectives, it is arguably bolder and more audacious than postwar reconstruction. That is because Bush’s plan aims at rehabilitating not the physical infrastructure of broken societies, but the foundations that support the infrastructure of democracy. Civil society is an essential part of that infrastructure. While it is not a panacea, it offers alternatives to the machete and misery and mass-murder that plague much of the southern hemisphere.

A Step toward Tomorrow

More than 100 years before the Marshall Plan, de Tocqueville observed that “social condition is commonly the result of circumstances, sometimes of laws, oftener still of these two combined.”[34] What is true of individuals is true of nations, and any foreign-aid program that fails to incorporate this notion into its mission will fail to have a lasting impact on its recipients. For almost five decades, America has tried to overcome the developing world’s terrible circumstances, terrible laws and terrible leaders with money and good intentions. It simply hasn’t worked. Thus, the Bush administration is trying something different, just as it did in the wake of September 11, 2001, when America realized that deterrence and containment no longer worked.

Whether or not the Millennium Challenge Corporation can transform the world remains to be seen. However, it is bound to transform US foreign aid—and that’s certainly a step in the right direction.

SIDEBAR

Each country that is eligible for MCC aid will be ranked according to a set of 16 performance indicators, which will help draw a composite picture of its long-term commitment to economic development and political liberalization. These ratings will be based on data from such diverse sources as the World Bank, the International Monetary Fund, the Heritage Foundation, Freedom House, the United Nations and Institutional Investor Magazine.

[21] Bush, National Security Strategy of the United States of America, September 2002, p.21; Don Eberly, “The role of civil society in shaping character,” The Heritage Insider, September 2002, pp.10-12, www.heritage.org.

[22] Nowels. p.8.

[23] Eberly, p.11.

[24] See Nowels, p.18.

[25] Leebaert, p. 333.

[26] The Independent Sector, “Giving and Volunteering in the United States 2001,” “The New Nonprofit Almanac in Brief,” http://www.independentsector.org/; USAID, p.135.